Sunday, March 21, 2021   /07:38 AM / By US SEC  / Header Image Credit: Forbes

TheSecurities and Exchange Commission charged James Roland Jones of Redondo Beach,California, with perpetrating a fraudulent scheme to sell what he called "insider tips" on the dark web.  The darkweb allows users to access the internet anonymously and, as such, has oftenbeen used to host websites and marketplaces that support or promote illegalactivity.  This is the SEC's firstenforcement action involving alleged securities violations on the dark web.

TheSEC's complaint alleges that, in late 2016 and 2017, Jones accessed variousdark web marketplaces, including a website claiming to be an insider tradingforum, in search of material, nonpublic information to use for his ownsecurities trading.  According to thecomplaint, in order to gain access to the insider trading forum, Jones liedabout possessing material, nonpublic information.  By doing so, Jones allegedly gained access tothe insider trading forum for a short period, but was unsuccessful in obtainingvaluable material, nonpublic information. 

Thecomplaint further alleges that Jones subsequently devised a scheme to sellpurported insider tips to others on the dark web.  The SEC alleges that, in the spring of 2017,Jones offered and sold on one of the dark web marketplaces various purported "insidertips" that he falsely described as material, nonpublic information from theinsider trading forum or corporate insiders.  According to the complaint, several users paying in bitcoin purchasedthese tips and ultimately traded based on the information Jones provided.

"Thiscase shows that the SEC can and will pursue securities law violators whereverthey operate, even on the dark web," said David L. Peavler, Director of theSEC's Fort Worth Regional Office.  "Wehave committed staff and technology to pierce the cloak of anonymity thesewrongdoers try to throw over their crimes."

TheSEC's complaint charges Jones with violating the antifraud provisions of thefederal securities laws.  Simultaneouswith the filing, Jones agreed to a bifurcated settlement that, subject to courtapproval, permanently enjoins him from further violating these provisions, andreserves the determination of disgorgement and civil penalties for a laterdate.

Ina parallel action, the U.S. Attorney's Office for the Middle District ofFlorida filed criminal charges against Jones. 

TheSEC's investigation was conducted by David Hirsch, Todd Baker, and Morgan WardDoran, and supervised by Scott Mascianica and Eric Werner. The litigation willbe led by Keefe Bernstein. The SEC appreciates the assistance of the U.S.Attorney's Office for the Middle District of Florida and the Federal Bureau ofInvestigation.

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